W30 trillion to be spent to nurture startups

The government will set up a 10 trillion won ($8.9 billion) innovation venture fund and raise 20 trillion won via state and private lenders to nurture startups over the next three years.

To boost venture capitalists’ investment in tech startups, the government will also revive a tax exemption for stock option gains for the first time in 11 years.

These are part of a package of programs to build an environment where venture capitalists nurture innovative startups and share profits.

“We will create a second startup boom by establishing a new ecosystem to nurture innovative startups,” Strategy and Finance Minister Kim Dong-yeon said. “The economy grew 1.4 percent in the third quarter, and both external and internal risks are easing. However, the improvement is not perceived by ordinary people. It is thus important to speed up innovative growth.”

The Moon Jae-in administration has been emphasizing an “innovation growth strategy” that seeks economic growth through innovative startups.

There has been concern that Korea is losing dynamism in startups, unlike the early 2000s when there was a venture boom. While the number of startups is not small, few are based on entrepreneurship.

The ratio of startup founders holding a master’s degree or Ph.D. is just 14 percent, which contrasts with 40 percent in the United States. The ratio of startup investment to gross domestic product (GDP) was 0.13 percent in 2015, which is far lower than the 0.33 percent in the U.S. and 0.24 percent in China.

The administration aims to motivate talented people to launch startups. People with creative ideas now hesitate since a business failure causes irreversible damage to the founder. They are rarely given a second chance, while they cannot quickly convert their achievements into cash by listing on the bourse or through mergers and acquisitions.

To encourage workers of conglomerates and other companies to launch their own innovative busi- nesses, the government will support firms if they invest in these intra-company startups. There will also be “startup leave,” which guarantees them the chance to return to work at the firms if their startups fail. Universities and research institutes will also get incentives according to their support for startups.

“The experience of failure should also be a valuable asset for society,” Kim said. “An ecosystem should be set up so that those who fail should rise again.”

Technology financing is another key for an innovative economy. A comprehensive credit evaluation method will be applied, assessing both the credit and technology of the innovative business applying for a loan.